Central bank meetings, China’s ‘proactive’ economic policy, Covid Omicron, inflation and the end of year retailing season – it will be another busy week for market to grapple with as we head to the final three weeks of 2021.
There are meetings of the global central banking heavyweights – the US Federal Reserve, Bank of England, Bank of Japan and European Central Bank. The fed is the one to watch.
Central bank monetary policy decisions are also due from Norway, Taiwan, Switzerland, the Philippines the day after the Fed announcement on Thursday morning, Sydney time.
There’s also the release of early data from the monthly surveys of activity in manufacturing and services for Japan, much of Asia, Australia, the UK, Europe and the US.
In Australia there’s the mid-year budget review, as well as the November jobs data, New Zealand’s third quarter GDP and the final drop of China’s November economic data, not to mention further developments in the country’s property crisis.
Next week it’s all about Christmas, and then the New Year with the final reading of US GDP for the third quarter, US retail sales and then on or around December 31, the end of the year, the quarter and the half year for myriad corporates and governments here and offshore.
The mid-year budget update will be released on Wednesday and it has to be remembered that it is really a pre-election scene setter ahead of what could be an earlier delivery of the 2022-23 Federal budget before a federal poll next May.
The AMP’s chief economist, Shane Oliver says In Australia, the update “is likely to see the projected budget deficit this year revised down to around $70bn (from $107bn projected in the May Budget) allowing for the improvement in the budget seen already reflecting lower unemployment and stronger corporate tax revenue.”
“However, allowance for $20bn in pre-election fiscal stimulus is likely to see only a $10bn improvement in the deficit for 2022-23 to $89bn from the $99bn deficit projected in May,” Dr Oliver wrote in his weekly note at the weekend.
The other major event in Australia is the November jobs report on Thursday. Dr Oliver reckons we can expect the jobs report “to show employment up 180,000, the participation rate rising to 65.4% and unemployment falling back to 5%.”
Economists at Moody’s, the ratings group, sees the headline unemployment rate easing to 5% from 5.2% the month before.
Meanwhile, there’s also the monthly business survey from the National Australia Bank on Tuesday and the Westpac/Melbourne Institute consumer confidence update on Wednesday.
This week sees more annual meetings – to be dominated by Westpac on Wednesday and NAB and ANZ the day after. Incitec Pivot (December 17) and Nufarm (December 17) also hold annual meetings this week, as does Elders (December 16).
Two meetings of London listed companies with Australian links will also be held – Solgold (December 15) where BHP and Newcrest have big stakes – Solgold has the potentially ginormous Cascbel copper/gold deposit in northern Ecuador and Greatland Gold (December 14) which is Newcrest’s partner in what is looking like a massive gold discovery and emerging mine called Havieron, near Newcrest’s Telfer mine in the far Eastern Pilbara.
…………
In the US it’s the two-day Fed meeting that dominates, as well as the November retail sales, producer price index, industrial production and housing starts.
There’s also a few quarterly reports – FedEx, Adobe and in Europe, Inditex, the parent of the huge Zara fashion chain.
Thursday’s meeting of the European Central Bank will likely keep monetary policy unchanged, according to Dr Oliver who wrote at the weekend:
“The ECB is likely to remain dovish on rates but will be watched for what it plans regarding asset purchases after its pandemic emergency bond buying program ends early next year but the net impact will likely be to allow some reduction in bond buying.”
But Moody’s economists took a slightly different view “We do expect some guidance on central bank plans for its quantitative easing policy. “We’ve been expecting a continued gradual decrease in the pace of PEPP (bond) purchases, but with much uncertainty still surrounding the Omicron variant the ECB may delay a decision and keep purchases at their current pace.”
“For the same reason, we expect the Bank of England to delay its interest rate hike until the policy meeting in February, Moody’s economists wrote.
But the AMP’s Shane Oliver reckons its a 50/50 chance that the Bank of England will leave monetary policy on hold at its meeting on Thursday (when they will have a clear view of the impact of the fed and ECB meetings).
“There is a big difference between the Fed & ECB which are making decisions around tapering (ie still easing but at a slower rate) and the BoE which is considering rate hikes (ie monetary tightening),” he wrote.
The Bank of Japan meeting on Friday will not see any change in its very easy monetary police stance as the country tries to confront Covid omicron before it becomes a concern.
The Bank of Japan releases it end of quarter Tankan survey of Japanese business sentiment and planning (early because of the end of year break).
Elsewhere in Asia (and apart from Australia) New Zealand releases its third-quarter GDP. Moody’s forecast that “New Zealand economy to have contracted 4.5% in quarterly terms in the September quarter, following a 2.7% expansion in the prior quarter.”
“The resurgence of COVID-19 cases triggered the reimposition of movement curbs since August, denting the economy’s strong recovery momentum. A noticeable pullback in spending relative to the prior quarter is expected to have driven the quarterly contraction.”
In China there’s the release of November’s industrial production tomorrow which is likely to have expanded 3.5% in yearly terms. “This contrasts with China’s retail sales growth, which is likely to have eased to 4.6% in yearly terms in November, from 4.9% in October.
Urban investment is expected to be again weak – especially property. Production will be mixed to weak, except for the energy sector (coal, oil and gas) which has stepped up output to help avoid more power rationing and blackouts in the current winter heating season.
